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How
does a pawnshop work? |
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Pawnbrokers
lend money on items of value ranging from gold and diamond jewelry
to musical instruments, televisions, tools, household items, etc..
These items maintain their value over a reasonable period of time
and are easy to store, especially jewelry. All customers provide collateral,
eliminating the need to distinguish high risk from low risk borrowers.
Typically, loans are small averaging between $70 and $100, although
they can be as small as $20 or as high as several thousand dollars
depending on the value of the collateral. Contracts vary from state
to state, but the average loan period is 90 days. Generally, interest
rates will vary with the amount of the loan. The process is much the
same as any other lending institution, with the primary difference
being the size of the loan, the collateral and the holding of the
merchandise until the interest or the loan has been repaid. |
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Why
would someone go to a pawn shop to get a loan? |
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Pawnshops
offer the consumer a quick, convenient and confidential way to borrow
money. A short term cash need can be met with no credit check or legal
consequences if the loan is not repaid. A customer receives a percentage
of the value the broker believes the collateral would bring in a sale.
Although the loan to collateral ratio varies over time and across
pawnshops, a loan of about 50 percent of the resale value of the collateral
is typical. In other words, pawnbrokers feel their loan is "paid in
full" at the time it is made. When a customer pawns an item, terms
of the loan are printed on a pawn ticket that is given to the customer.
The ticket states the customers name, address, type of identification
provided to the pawnbroker, a description of the item, amount lent,
maturity date, interest rate and amount that must be paid to redeem
the item. Most states regulate pawnshop interest rates and other charges,
such as storage or insurance fees. |
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What
is the foreclosure procedure? |
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If
a customer defaults, the collateral becomes the property of the pawnshop
after the loan is overdue by a specific amount of time, generally
one to three months. Most states require the broker to notify by mail
the owner of the pledge that he will loose the right to his property
unless he redeems it within the stipulated grace period. |
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Do
most pawning customers lose their merchandise? |
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On
average, 70 to 80 percent of all loans are repaid. Repeat customers
make up most of our business, similar to any other lending or retail
establishment. Pawnbrokers know the vast majority of their customers
because they often borrow against the same items over and over again.
Pawnbrokers offer non-recourse loans, looking only to the item being
pledged to recover their investment if the borrower chooses not to
repay the loan. It is solely the choice of the customer whether he/she
elects to repay the loan. |
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How
can I be sure the merchandise I purchase at a |
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pawnshop
isn't stolen? |
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Less
than one fifth of one percent of all collateral is even suspect as
having been misappropriated in any manner. Thieves and robbers are
a pawnbrokers worst enemy. Pawnbrokers work closely with local law
enforcement to catch and prosecute these perpetrators. A customer
must provide positive identification to show evidence of the transaction.
This information is then presented to the police department, therefore
decreasing the likelihood that a thief would bring stolen merchandise
to a pawnshop. Pawnbrokers are trained to look for signs of stolen
property to avoid these costly mistakes. It is not in the interests
of the pawnbroker to accept potentially stolen merchandise because
the police can seize the merchandise and the pawnshop owner loses
the collateral and the loaned money. |
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What
is the difference between buying at a pawnshop and |
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buying
at a retail
store? |
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Mainly
price. Pawnshops can offer you merchandise ranging from 1/3 to 1/2
off retail prices. |
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Why
is the image of pawnbroking changing since the 1930s?
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Today's
pawnbroker is upgrading everything from the interior and exterior
of his or her shop location, employee presentation, customer service,
signage, marketing and the merchandising approach. Pawnbrokers focus
on providing exceptional customer service and are very active in the
community, both politically, and in local charities. Pawnshops today
range from a single or multi-store operation to publicly held company
chains. The atmosphere at a pawnshop is nothing like what you saw
in Rod Steiger's depiction in The Pawnbroker -- just visit one to
see for yourself. |
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Are
pawnshops a "bad times industry? |
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Pawnshops
survive bad times if they make adjustments both at the retail and
loan counters, but they do far better in good times. In hard times,
customers move away to finds employment, have less ability to repay
their loans and the value of all merchandise goes down. Merchandise
values go down because the major retail discounters sell for less
to maintain or broaden market share. If they sell for less, pawnbrokers
must loan less thus earning a smaller return. Regardless of income
level, most people periodically borrow money. In good times, customers
are more able to repay their loans and unredeemed merchandise sells
faster because customers have more discretionary income. |
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Do
pawnshops attract indigents and derelicts? |
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Absolutely
not. Indigents and derelicts have no assets to use as collateral.
No one builds a business around these people. The typical pawnshop
loan customer is employed, living within one mile of the store, is
of either sex, and occasionally needs short term cash for an unusual
bill such as a medical expense or car repairs. The typical retail
customer is a bargain hunter, either by need or desire and comes from
all walks of life. Most pawnshop customers are repeat customers. |
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Do
pawnshops down-grade the neighborhood and hurt |
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property
value? |
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Neighborhood
property values are impacted by the appearance and care given to the
properties. There is no factual basis to support a claim that an eye-pleasing
pawnshop negatively impacts values. On the contrary, if they attract
customers, they enhance the opportunities for other merchants and
the community. |
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Are
there firearms in pawnshops? |
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Pawnshops
are registered firearms dealers with permanent places of business.
Pawnshops comply with all Federal (ATF) regulations as well as furnishing
local law enforcement with information regarding every transaction.
No other dealer does this. As registered licensed dealers, pawnshops
comply with the 5 day waiting period and back ground checks required
by the Brady Bill. Federal firearms regulations require an individual
to be 21 years of age to purchase a handgun and 18 years of age to
purchase a long gun. Pawnshops provide a unique public service by
taking guns as collateral for pawn loans. They are the only business
that actually takes guns out of circulation and keeps them locked
up in secured vaults. There are an estimated 1.5 million secured firearms
in pawn shop vaults across America. |
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Are
pawnshop rates excessive? |
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To
provide the service, all lenders must charge rates commensurate with
risk, size and duration of the loan, collateral offered, and recourse.
Pawnshop loans are small dollar, high risk, short duration loans.
The item stands as the sole collateral offering no other recourse.
And pawnbrokers are liable for replacement value if something happens
to the item in their care. There are no hidden charges as with other
lending institutions. On the other hand, pawnbrokers cost basis is
far greater. They incur cost for security, handling, storage, and
regulation not incurred by others. Due to the 15-20% of pawn shop
customers that elect not to repay their loans, pawnbrokers are forced
to turn their "bad debt" into a retail center to recover their cost.
Other lending institutions do not incur retail cost including additional
floor space, gondolas, counters, personnel, advertising, shop lifters,
retail competitive cost, and new merchandise cost to supplement the
unredeemed goods. |
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Should
photographing or fingerprinting pawnshop |
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customers
be required? |
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Pawnshop
customers already provide full identification with each transaction,
a copy of which goes to local law enforcement. Additionally, most
pawnshops maintain surveillance cameras in their stores, the same
system used by banks. To require anything more than required by banks
implies there is a relationship between how much money one has and
their integrity. You have questioned the quality of their character
based on financial status - a form of discrimination. |
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Should
there be zoning restrictions other than general |
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retail? |
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Pawnshops
are neighborhood businesses providing vital services to the community.
To restrict zoning to other than general retail should require a very
compelling reason. The compelling reason should not be historical
perception. To restrict zoning there should be something wrong with
the service provided, the business itself, or the customer served.
The services provided by pawnshops include: |
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1. |
Discount Retail (new and preowned) is an opportunity for customer
to make their dollars go further - it helps other merchants and community
by giving them more discretionary funds. |
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Short-term
credit enables the community to pay the bills of other local merchants
such as groceries, medical expenses, utilities, auto and transportation
to work. The pawn business is a neighborhood business with the majority
of customers residing within 1-2 miles. The same people utilize a
pawnshop that utilize McDonalds. If appearance or wrongful activities
are a problem, it has to do with that particular business, regardless
of the kind of business. The customer is the surrounding neighborhood
- if good, good - if bad, bad. Restrictive zoning denies access to
credit to low income consumers who cannot travel or who are uncomfortable
in restrictive areas. Restrictive zoning implies the neighborhood
is dishonest and questions the integrity of the residents - and it
says that how much money your have determines the quality of your
character. |
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